What value can a financial adviser offer?

What value can a financial adviser offer?

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Wealth Solutions in our Edgbaston or Warwick offices.

What value can a financial adviser offer? Many people imagine that a financial adviser simply helps you choose funds and other investments. With expert help, you can construct a portfolio with a better chance of producing strong returns. However, this is only one part of the value of a financial adviser. Another main advantage is that an adviser can help you sidestep a range of common, expensive errors that can undermine your financial goals.

Below, our team at Wealth Solutions explains the ways that a financial adviser can demonstrate this value. We hope this is helpful to you. If you’d like to speak to an independent financial adviser then you can reach us via:

T: Edgbaston 0121 446 5815
T: Warwick 01926 888091
E: [email protected]

Financial advice and vision

What do you want to achieve in life? Perhaps you want to retire early and travel the world, one day, with your spouse. Maybe you want to have a large family and spend as much time at home as possible to raise the kids. Whatever they are, your goals will cost money – needing a strong financial plan to help you achieve them.

Many people struggle to establish a clear vision for their financial plan, however. How much do you need for retirement, and are you on track to attain this? Projections lie at the heart of much financial planning. Yet it is difficult to know where you stand now with your wealth – let alone in 20 years’ time! Here, a financial adviser can help. They have the skills, knowledge and software to help establish where you are – plotting viable paths ahead to get you in the right direction.

The danger of doing this yourself is that you underestimate how much you need later for your retirement. Or, perhaps you misunderstand your current assets versus liabilities – and how they can be best organised and managed.

Investment option guidance

Which investments should you pick for your portfolio? This can be trickier than it might seem. First of all, there are over 4,000 funds to choose from in the UK. How many do you need, and which ones are best? Secondly, which asset mix should you select and what kind of attitude to risk should you take? For instance, you could focus heavily on bonds – minimising volatility but producing lower returns – or prioritise shares (entailing higher risk, but more potential reward).

A common mistake is for investors to over/underestimate their risk tolerance. Here, a financial adviser can help you honestly face this. Perhaps they ask you questions like: “If your portfolio fell suddenly by 25% tomorrow, what would you do?” If you believe, deep down, that you would likely take your money out of the market, then maybe you need to focus on a more “defensive” portfolio (e.g. bonds and dividend-paying stocks). However, many investors – particularly those with a long investment horizon – are too cautious with their portfolios. Here, a financial adviser can suggest ways to take more sensible risks so that you maximise your wealth growth.

Of course, another benefit of a financial adviser is that they can act as a “sounding board” if you ever start to panic or have doubts about your investment. Everyone faces strong investor biases that are difficult to manage on our own (e.g. herd mentality). Having an extra, experienced set of eyes on your portfolio can help guard against impulsive decisions that you may regret later – e.g. “panic selling” during a temporary crash, like in March 2020 (the short “Covid Crash”).

Effective tax planning

The UK tax landscape is complex and is subject to change. Navigating this on your own is not an easy task. A financial adviser will be well versed in how to best organise your wealth so that it is not needlessly eroded – suggesting ideas that you might have missed.

For example, suppose you want to start reducing your working hours from age 55 – taking funds from your pension, to make up the difference (whilst continuing to contribute into it). Many think this can be done without consequence. However, this typically triggers the “money purchase annual allowance” (MPAA) rules – which dramatically reduces your annual allowance. Normally, you can put up to £40,000 into your pension (or 100% of your salary – whichever is lower) and the UK government will “top up” the contributions via tax relief. However, the MPAA rules lower this to £4,000 per year (a 90% reduction). This can severely restrict your ability to keep putting money into your pension whilst continuing to work.

Many people fall into this “MPAA trap” inadvertently. However, a financial adviser can point out pitfalls like this to you – offering tax-efficient alternatives, well ahead of time. For example, it may be better to build up an ISA portfolio in the years leading to your mid-50s and draw from that if you eventually start winding down your working hours. Investments in an ISA are free from tax on capital gains and dividends, and withdrawals do not trigger the MPAA rules.

Invitation

We hope this content has been informative and inspired you to develop your own financial plan. Please get in touch if you’d like to discuss these matters with us via a free, no-commitment consultation with a member of our team:

T: 0121 446 5815
E: [email protected]

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